Cody Willard’s stock portfolio

Here’s the transcript of today’s chat from TradingWithCody.com, an independent service not affiliated with Marketwatch.

Q: Cody, I am wondering what your cash to investment ratio is these days? I’ve been at 50%-60% cash this year and up around 13% YTD with today’s nice run, not sure which way to go now. Thanks Cody.

Cody: I’ve been buying some new names, adding to some calls, shorting some new names and adding to some puts in the last few weeks and haven’t been selling/trimming as much lately, which means that my cash position is down from where it had been when I’d been “cash heavy”. I’m probably carrying about half as much cash as I had been, so I’m about 20-30% in cash right now. But as I always tell you guys, that kind of “how are you weighted right now” analysis can be totally misleading. What if I need more cash to close on a real estate deal next month so I pull some out…does that count as having less cash? What if I take all the cash flow I make from all the various business ventures I’m involved in and added that to my portfolio this month…does that count as having raised cash? Anyway, I think you guys have gotten on my page about how long-term and patient we need to be as we build and trade and analyze our portfolio positions over and over and over again in coming weeks, years and decades — and that’s what we have to remain focused on. Whether you’ve got 50% cash or 10% cash or you make twice as much every year as you have in stock or whether you live off dividends and are trading a tiny bit of capital to complement those returns or whether you own a bunch of apartment buildings and you trade your IRA’s money that you plan to start living off of in twenty years….all these things make the question about “how cash heavy are you right now?” less important than it seems. Stay in the game.

Q: Cody – you often start new long-term positions within a few weeks before earnings (think ADSK, APOL, FFIV). Can you share your thoughts on starting before the news versus after? Thanks.Q: Would you buy AAPL heading into earnings? Cool, thanks.

Cody: Let’s answer both these questions at the same time here. If I like a stock, such as Apple or F5 for the long-term, I will likely buy a starter position in it no matter what the earnings calendar says. But I pretty much always use a tranche-style of buying so that I can start a position and then I can add to it after the report, depending on how the stock trades and depending on if anything in the report made me change my mind. If I like the set up for the stock as an outright “earnings play” I will be more aggressive in using near-term calls in my first tranche buy than otherwise. But no matter what, you should never go too crazy trying to game how millions of traders will react to a single company’s individual earnings report. Winning in the stock market is about getting thousands of these trades and investments more right than wrong in coming years.

Q: I am long Riverbed and it’s had great upside recently, but you mentioned some possible concerns last week?

Cody: Yea, I’ve had some near-term concerns about RVBD, but the more homework I’ve done on that company (and FFIV by the way) specifically, I am comfortable holding it into the quarter — meaning that if it were to get hit on the quarter, I’d likely add to my position. Other than that, steady as she goes with RVBD for now.

Q: I’m 60% down on my Mar20 Puts in BK. At what point should I consider doubling down, letting it ride or just bail out?

Cody: I’m holding onto my BK puts, even as I’ve also got losses on them. I do plan on adding to them soon, depending on the stock’s action from here. I’d like to see it break down back below $20 and I might add to them. Otherwise, I am letting the puts act as a natural stop loss on this one, as I have not outright shorted BK common.

Q: How about playing CCL on the disaster, down 14%.

Cody: I don’t have any edge on gaming CCL. I wouldn’t want to short it after it’s already down 14% since the tragic Carnival wreck in Italy but I also wouldn’t want to risk my hard-earned capital on the headlines that could be headed our way bashing Carnival’s response/preparedness/practices/etc. Too risky either way.

Q: Cody, any thoughts on CIEN as it is up almost 50% in a month?Cody:I talked last week about how Ciena’s likely got some momentum to it since the AT&T/T-Mobile merger fell apart and that T’s likely to have to spend on infra to keep up with Verizon now and that Ciena’s going to benefit from that. I do think that is exactly what’s happening here. But keep in mind that Cien’s still down 50% from its 52-week highs even after rallying 50% from its recent lows. It’s a volatile one, that is.

Q: Do you think MSFT’s trend upward will continue and do you anticipate adding to the position in the near future? Thanks and great work!

Cody: Softee’s tough in the near-term. The stock is just so loathed by the big money managers who don’t own it and has been such a long-term holding of those who do own it, that it really will take some surprising success from Windows Mobile and the Nokia partnership to drive MSFT into the $30s. I plan on holding the MSFT position I own for a while and I don’t know when or if I’ll add to it.

Q: Cody, not sure what made PNC snap today – maybe some insiders selling, is it worth increasing our short positions further?Cody: PNC profit declines 40 percent‎ in their report today. The Street is disappointed in the earnings. Recall that we’re short this and other financials not just because of earnings estimates likely being too high for this year and next for these companies, but also because of litigation/criminal investigation into these TBTF banks’ activities that have yet to happen, but continue to develop.

Q: Cody, what about QCOM?Cody: I’ve highlighted QCOM as a great long-term investment many times in many forums over the years and even in the last few months I’ve cited ithere on TradingWithCody.com as a good trade. I could kick myself for not having owned it. Long-term it’s still a great stock. Near-term, it’s a tough one as the momentum guys are back in it and who knows what they’ll be looking for/reacting to in QCOM’s upcoming earnings report.

Q: Any reason why SOXX is up 5 percent??

Cody: Easiest answer about the SOXX being 5% today is a short-covering/scramble by the bears into earnings season. JPM’s semiconductor analysts have been saying that last quarter was the bottom of the fundamental cycle for the semi’s and that the next few quarters are primed for boom times. I am not quite as bullish and ready to call a full-on bottom in the economic fundamentals for semi’s but I would much rather be long the semi’s than short the semi’s right now.

Q: Hi Cody, I just want to get some updates from you on VIX or VXX calls. Do you expect the market to have some panic in the next month or so? I agree with your views on VIX but I just don’t know which month to buy for calls since there might be a rally from earnings within these few weeks.

Cody: I’m sticking with the VIX/VXX calls for now. Recall that owning VIX calls doesn’t necessarily mean you’re betting on a market decline — The VIX measures volatility, which can spike during rallies or during crashes. And my thesis on these VIX calls has played out exactly like I’d outlined when we made the trade — that is, the VIX has climbed about 10% in the last week or so even as the markets have also climbed in the last week or so. Volatility has increased in the new year and I’m holding these VIX calls steady for now. I plan on owning these through earnings season and we’ll re-evaluate in a month when we’re through with the earnings reports and likely continued/ensuing increased volatility.

Okay guys, that’s another notch on our belts. I always tell subscribers that I don’t have any magic bullets, but I will communicate to you how I’m giving my own personal portfolio as much upside potential with as little risk over the long-term using both trading and investing strategies that I’ve mastered as a successful professional trader and money manager over the years. Thanks for subscribing and for joining me here in the chat today.

Cody Willard writes Revolution Investing for MarketWatch and posts the trades from his personal account at TradingWithCody.com. At time of publication, Cody was net long F5, Riverbed, VIX, Autodesk, Microsoft, Google and Apple as well as short Bank of New York and Apollo.

Story Conversation

About The Cody Word

Cody Willard writes the Revolution Investing investment newsletter for MarketWatch and posts the trades from his personal account at TradingWithCody.com He is the founder of WallStreetAll-Stars.com and the principal of CL Willard Capital. Cody serves as an adjunct professor at Seton Hall University and is on the University of New Mexico Alumni Board. He was an anchor on the Fox Business Network, where he was the co-host of the long-time #1-rated show on the network, Fox Business Happy Hour. Cody, a former hedge fund manager, and his stock picks and economic outlooks have been featured on NBC’s The Tonight Show with Jay Leno, ABC’s 20/20, CBS Evening News, CNBC’s SquawkBox, Jon Stewart’s The Daily Show, as well as in the Financial Times, Wall Street Journal, New York Times, and many other outlets.